Pros and cons of a private sale
In this market, it can seem easy to drum up interested buyers. But there are pros and cons to ditching the real estate agent, writes Mikaela Wilkes.
How hard can it be to sell a house right now? All you need is a house, some professional photography, a sign, and a lawyer, right? So why pay thousands of dollars to a real estate agent?
Private sales made up just 14 per cent of all residential property sales in New Zealand in the year to July (down from 20 per cent in 2017-18 and 23 per cent in 2014).
Bruce Patten, mortgage adviser for Loan Market, has been in the industry for more than two decades. He has sold half a dozen of his own houses in that time, all through real estate agents, and wouldn’t do it any other way.
His current home is now on the market – with an agent. ‘‘There’s nothing wrong with doing a private sale,’’ he said, ‘‘but my personal view is that I don’t want the hassle of negotiating, and I believe firmly that by selling with an agent I will make more than they will cost me in fees.’’
Patten says he wouldn’t trust himself to be the best judge of how much his property could sell for. He has clients who thought their Auckland home would be worth a maximum of $1.5 million – then it sold for $1.8m. Even if the agent fees were $40,000, he said, the couple still made $250,000 more than if they had negotiated a price themselves.
‘‘When the market is so buoyant, people think sell privately. My concern is you might be doing yourself out of way more than a commission,’’ he said.
According to the Real Estate Institute of New Zealand (REINZ), the median price for properties sold by real estate agents was 15 per cent higher than private sales at $673,000, compared to $585,000.
‘‘This is the highest premium REINZ has seen in 18 years. That means an agent’s true value when it comes to a property sale process and outcome is the best it has been since 2002,’’ said chief executive Bindi Norwell.
‘‘Interestingly, the majority of people who sell privately, sell by negotiation, suggesting that perhaps the use of auction or tender as a marketing/sales technique could be one additional reason for the premium.’’
But Listed.co.nz co-founder Todd Rankin-Hirst believes the industry membership organisation’s figures don’t show the whole picture, because they also include transactions such as selling to trusts, parents selling to their kids, and off-theplan sales. ‘‘These are often not sold at market value due to their nature,’’ he argues.
Rankin-Hirst believes a fairer comparison is between agency sales and only ‘‘properly marketed’’ private sales.
‘‘If that comparison was made, you should see a similar sale price, but a much better cash-in-the-hand outcome for the vendor because you aren’t paying a 4 per cent commission on the sale to an agent.’’
Nelson couple Fiona McConnochie and Graeme McGrath sold their home to firsthome buyers in a private sale. The couple looked at sales of similar properties to gauge the market and set a price, asking for ‘‘offers over’’ to avoid lowballing.
McConnochie described the experience as positive, but said not every vendor would have the time and energy necessary. ‘‘You need time to put into it. I turned it into my fulltime job for a few weeks.’’
McGrath grew weary of the hordes of viewers. ‘‘It was stressful of course, selling a house always is. But the fact we didn’t have to deal with agents was really good, and we saved between $16,000 and $20,000 in fees.’’
In January, 4 per cent of properties for sale on Trade Me were listed privately. That compares with 7 per cent in January last year.
‘‘Selling a house is not the same as selling furniture or even a car,’’ said Trade Me property sales director Gavin Lloyd.
‘‘It is likely to be the most expensive transaction that most
‘‘When the market is so buoyant, people think sell privately. My concern is you might be doing yourself out of way more than a commission.’’
Bruce Patten
Loan Market mortgage adviser
people are ever going to make. It has some complexities and a bunch of legal considerations – for this reason, many people choose to appoint a licensed real estate agent.’’
Currently, there are just over 500 properties for sale on the site which have been listed privately.
‘‘But attracting interest is only one part of selling a house. People unaccustomed to the process are often surprised by the extent of facilitation and hand holding that is required to bring interested buyers to the table to make an offer or to attend an auction.’’
If you do decide to sell your property privately, your target is to get a similar price to what an agent would get. Selling privately may give the seller more direct control over the negotiation process.
‘‘However, with complete power comes complete responsibility,’’ said Real Estate Authority (REA) chief executive Belinda Moffat.
You have a legal obligation to share all the relevant information about your property, such as any issues with the boundary or title, any unconsented building
work or alterations, any known weathertightness issues and whether there are any proposed developments that could have an impact on a buyer’s access, views or enjoyment.
If you fail to do that, you could put the sale in jeopardy, or even be taken to court for compensation.
‘‘When weighing up whether to sell your home privately, consider whether you have the marketing and negotiation skills needed to do a good job selling
what is likely your biggest asset. You will also need to work out what your property is worth in the current market, and the price you’ll be willing to accept,’’ said Moffat.
Also, consider your time investment. The market is buoyant, so the property could sell quickly – but it could also mean you’re fielding questions from dozens of interested buyers.
Moffat and Norwell strongly recommend private sellers get an independent valuation to
inform their pricing, and use a lawyer or conveyancer to handle the legal documentation, including the sale and purchase agreement.
‘‘Selling your own home is a big task, and while we see some individuals opting to sell privately, rather than with an agent, it tends to be something left for those who have the time, inclination, expertise and patience to do so,’’ said Norwell.
‘‘For example, if you’re a busy family where both parents work fulltime, then it might be better to utilise the skills and expertise of an agent.
‘‘Selling a property is not something that has become easier over the last few years. If anything, we have seen more legislation incorporated into the process.
‘‘Working with a real estate agent means that they have had mandatory training on the legislation and know how to navigate the entire process.
‘‘In addition to the price premium, there are advantages in dealing with a licensed real estate agent compared to selling privately.
‘‘As an organisation we have never argued for a ‘closed shop’ and believe that people should have choice when it comes to choosing how they want to sell their property – and indeed some do,’’ points out Norwell.
‘‘Our advice to those who are considering selling privately is to gain an independent valuation, don’t sign anything that hasn’t been approved by your legal adviser and don’t be afraid to walk away if you feel uncomfortable – it’s your house and your call,’’ said Norwell.